IAG Investor Day...IAG Investor Day 8 December 2016 Introduction & strategy overview Peter Harmer Managing Director and Chief Executive Officer 3 09.00 am Introduction & strategy overview

IAG Investor Day8 December 2016

Introduction & strategy overview

Peter HarmerManaging Director and Chief Executive Officer

3

09.00 am Introduction & strategy overview Peter Harmer, Managing Director & CEO

09.15 am Customer Julie Batch, Chief Customer Officer

09.30 am Optimisation Mark Milliner, Chief Operating Officer

09.50 am Agility Jacki Johnson, Group Executive People,

Performance & Reputation

10.00 am Capital Nick Hawkins, Chief Financial Officer

10.20 am Morning tea (webcast paused)

10.40 am Zone sessions

Note: Zone sessions will not be webcast

1. VenturingRon Arnold, General Partner, IAG Ventures

2. Product innovationJames Orchard, EGM Innovation

3. Customer-led growthDr Rami Mukhtar, CEO Ambiata

4. Operational partneringSuzanne Young, EGM Operational Partnering

11.30 am Webcast restarts

11.30 am Closing remarks and Q&A Main presenters

12.15 pm Lunch

Programoutline

Introduction & strategy overview | 8 December 2016

Our value proposition

4

Value drivers

Fuelling drivers(short to medium term)

Leading drivers(longer term)

• Leading player with scale advantage in Australia and New Zealand (low single digit growth)

• Focused Asian growth opportunity – large player in our chosen markets (high single digit growth)

• Digitally-enabled insurer that is customer-led and data-driven

• Innovation in capital management

• Improved efficiencies

Investmentcase

Through-the-cycle targets

• Cash ROE 1.5x WACC

• High dividend (60-80% of cash earnings payout)

• Top quartile TSR

• ~10% compound EPS growth

Shareholdervalue

Delivering strong shareholder returns


Strategic context

5

Our purposeWe make your world

a safer place

Our opportunityEmbraceinnovation

Our promiseInspiring customer

experiences

Our purpose, opportunity and promise


Driving customer and business benefitsTwo strategic themes

6

Leading Fuelling

1. Digitally-enabled customer experiences

2. Partnering for success

3. Customer-influenced innovative offerings

4. Shared value investments

5. New ventures and incubation

1. Operational effectiveness

2. Supply chain utilisation and efficiency

3. Portfolio optimisation

4. Product and technology simplification

5. Innovative capital management


Operating landscapePredictive trends

7

• World awash with capital

• Continual regulatory change

• Climate change

• Demographic shifts

• Shifting preferences / needs to get the best from service providers

• Increasing digital interaction

• Computing power, automation and connectivity unlocking value chain

• Automated vehicle technology

• Technology-driven risk revolution

Environment Customer Technology


Our strategic frameworkPreparing IAG for multiple futures

8

Operational effectiveness

Cu

sto

mer

en

ga

gem

en

t

Deepen customer intimacy Partner selectively

Modularise platformOptimise core


Optimise coreFuelling by simplifying / optimising

9

Optimise core

• Drive increased simplification and scalability

• Supply chain utilisation and efficiency

• Become an agile organisation

• Deliver inspiring customer experiences


Modularise platform


Cu

sto

mer

en

ga

gem

en

t


Deepen relationshipsLeading with customers

10

Deepen customer intimacy

• Digitally-enabled customer experiences

• Needs-based customer propositions

• Ecosystems of adjacent services

• Data-driven targeted marketing

Partner selectively



Cu

sto

mer

en

ga

gem

en

t


Modularise platformCreating value closer to the customer

11

Modularise platform• Derive maximum value from each component of the value

chain

• Partner for capability in areas that are not a competitive advantage

• Offer steps in the value chain on a fee-for-service basis where they strengthen our competitive advantage


Optimise core


Cu

sto

mer

en

ga

gem

en

t


Partner selectivelyAccessing and strengthening capabilities

12

Partner selectively

• Target partners that complement or strengthen our capabilities

• New ventures and incubation

Deepen customer intimacy



Cu

sto

mer

en

ga

gem

en

t


How we are organisedStrengthening our common capabilities

13

Product design, marketing,

innovation, experience design

Sales and service

Fulfilment

Enablement

Customer and Digital Labs

Consumer | Business

Operations, including Claims and Supply Chain

People, Performance & Reputation,Legal, Finance, Technology

Australia New Zealand Asia

Customers


Customer

Julie BatchChief Customer Officer

And we are well positioned to respond

Our customers’ worlds are changing

Customer Labs was formed to respond to these changes, bringing together our unique capabilities to create

deeply personalised and differentiated products and experiences for our customers

The cloud allows

anyone to access

super-computing power

from anywhere

Everything that

we could possibly

know today is

available digitally

Social and pervasive

technologies are

blurring boundaries and

increasing transparency

Mobile phones mean

we are constantly

contactable and

continuously transmitting

and receiving data

Artificial intelligence

and automation are

changing how we work,

play and interact with

each other

15

Super-computersare on tap

Everythinghas been digitised

Poweris shifting

Peopleare connected

The rulesare changing

Customer | 8 December 2016

16

Creating newopportunitiesfor IAG

Blending art, psychology, engineering and science to inspire our customers

Customer-led products and experiencesNew products developed by listening and respondingto our customers

Powered by smart teamsNew thinking derived from collaboration of diverse teamswith customers and partners

Creating new methodsNew approaches to analysis, design and execution touncover new truths and deliver faster customer value

In an open worldA sound application of ethics will underpin our successin an increasingly open world


17

CustomerLabs

Customer

Data

Analytics

Design

Innovation

Venturing

Marketing

Digital

Customer Labs

Bringing capability together to shape customer-experience strategy and innovation


Placing customers at the centreUnderstanding whole-of-customer needs and leveraging the power of data

18

CustomersUnderstanding people

and what they value

CommunitiesOrganisations

Individuals and families

AssetsUnderstanding the things

we use and enjoy

UtilitiesIntangible assets

Tangible assets

Our businessUnderstanding whatdrives value at IAG

Our shareholdersOur people

Brands Initiatives

Our worldUnderstanding the worldwe live in, and the causes andconsequences of risk within it

Global Regional Local

IAG’s customer-centric information universe


Discover andexperiment

Launch Scale

Product innovation process

Researchers, students, entrepreneurs, start-ups

Business units, JV partners, supply chain, customers

Exte

rnal

Inte

rnal

Pro

duct

Funn

el

Inputs

Disruptivetechnology

Venturing

Ideas labs

Internaltalent

Embracing innovationEntrepreneurial mindset, drawing on research initiatives, universities, start-ups

19

Outputs

New and enhancedproducts andprocesses

Newbusinessunits

Start-upbusinesses

Overalloutcomes

Impact on culture Attract people Build STEM capability, market intelligence, financial return


Delivering new valueResulting in 25+ new partnerships, products and collaborations

20

Indonesia ride share opportunity


Accelerating our developmentNew initiatives, including launch of $75m IAG Ventures fund

Customerunderstanding

Value chaindisruptors

New pathwaysto market

e.g.

Internet of things,new data

applications and cyber

e.g.

Artificial intelligence,and robo-advice

e.g.

Peer-to-peer andthe sharing economy

21Customer | 8 December 2016

Optimisation

Mark MillinerChief Operating Officer

23

Operations

Enabling and empoweringIAG’s strategy

PoweringIAG’s

strategy

OptimisationSimplifying thebusiness to achievemore with lower costs

CustomerexperienceEnabling fasterresponse times andnew digital experiences

Operationalexcellence

Leveraging scale inclaims, supply chain

and partnerships

Optimisation | 8 December 2016

Optimisation programAt least 10% reduction in run rate exiting FY19

24

Three core pillars

1 Effectivepartnering

3 Procurementmaximisation

2Core systemsconsolidation

Progressive realisation of benefits

Expected net profile

• Exiting FY19 at $250m annual benefit run rate

• Intention to absorb related costs ‘above the line’, subject to lumpiness

• Further benefits beyond FY19

FY17

Smallnet negative

FY18

Broadlyneutral

FY19

>$100mnet benefit~$2.5bn of gross operating costs

(excluding commission)

Expensecategory

Employee benefits

IT

Rent

Marketing

Other

P&L line

Claims Underwriting expenses Fee-based

~$0.7bn ~$1.6bn ~$0.2bn


Effective partneringAccessing process expertise and lowering costs

25

Scalability

Simplicity Agility

• Simplifying our processes and reducing complexity

• Customer centricity and operational excellence go hand-in-hand

Global insurance and business

process expertise…

…to help improve our customer and

employee experience…

…and lower our operating

costs

• Partnering contracts negotiated and signed

• Waves 1 and 2 transition of activities underway

• Further waves of activity transition underway

• Operational Partnering Excellence framework embedded

FY18 FY19FY17


Planning of harmonisation Harmonise policies and products Implement single platform

Consolidate to single Guidewire platform

Migrate legacy platforms

Core systems consolidationInitial emphasis on claims, then policy administration

26

Cla

ims

Polic

yadm

inis

tration

Decommissioning of legacy policyand claims platforms

FY17 FY18 FY19 FY20-22

• Core systems consolidation will deliver scale benefits and drive efficiencies –32 systems reduced to two

• Incremental ‘claims first’ approach –realisation of early benefits whilede-risking execution


Procurement maximisationRange of other initiatives contributing to lower costs

27

• Substantial and sustainable cost reductions through effective and efficient space design

• Move from static to activity-based workplaces

• Estimated 16% cost reduction by FY19

• Major consolidations in Melbourne and Sydney(as leases expire, including Wesfarmers legacy portfolio)

Significant Australian floor space reductionby 2019

187,000m2

185,000m2

161,000m2

156,000m2

2016 2017 2018 2019

Consolidatelicences andsimplifybusiness

• Nine licences reduced to two –complete by August 2017

• Minimal customer impact

• Reduced administrative burden

Delivervalue-addingprocurementmodel

• Build and deliver simple, scalable and agile procurement solutions

• Leverage group-wide spend to realise savings and increase benefits

• Leverage data, analytics and insights to drive effective decision-making and actions


Claims indemnity cost reductionsIncreased utilisation of simple and scalable supply chain

28

Progressive implementation of national claimssupply chain – largely complete early FY17

IAG supply chain - property and motor Australia

1. Building repairs

2. Contents replacement

3. Smash repairs

4. Salvage

5. Hire car

6. Glass

7. Technical

8. Major event response

Supporting leadingcustomer experiences

• National supply chain partnerships network

• One core supplier system interface

• Consolidated partners supporting all IAG brands –mutually beneficial long term relationships

• Innovative strategies to reduce waiting periods –repair cycle time has contracted by over two days

• Major event response for all brands –first insurer to deploy drones for assessments

Scope for significantly increased customer utilisation, based on current uptake:

~60% ~40%Motor Home

Fragmentedand inefficient

Aligned, maturing and customer focused

WFI, Coles,Lumley

NRMA, RACV,SGIO, SGIC

CGU


Agility

Jacki JohnsonGroup Executive People,

Performance & Reputation

Shaping an agile organisation

• Unsustainable cost structure

• Ripe for disruption as competitors with zero cost to scale continue to enter

• Complexity

• Duplication

• Lack of innovation

• Low levels of accountability

Relational Connected Accountable

AvoidantTransactional Siloed

To enable strategy

30Agility | 8 December 2016

Shaping an agile organisation

To enable strategy

Organisational design Culture measurement Workforce strategy

An integrated and

whole systems approach

to accelerating IAG’s

cultural evolution,

rather than stand alone

programs dedicated

to culture change

Highly visible

performance and

reward frameworks

that reinforce our

cultural aspirations

Greater rigour and

accountably for driving

cultural transformation

Further focus

on embedding

IAG’s purpose

31

Real time, data

rich insights into

the health of our

organisational culture

Agility | 8 December 2016

IAG strategic workforce plan

Internal factors (demand drivers) External factors

Capability profile dimensions

Customer experiences Agility

Simplicity and scale

Socio-economic Political

TechnologicalLegal

The right

strategic and core

enabling skills

Skills

The right

number of people

for the jobs required

Size

The right

structure - insource,

outsource, diversity

Shape

The right

cost for the work and

output produced

Spend

The right

people in the

right locations

Site

32Agility | 8 December 2016

33

Balancingleading andfuelling

EnablingBuild an

agile organisation

LeadingDeliver inspiring

customer experiences

FuellingMake IAG simpler

and more scalable

Agility | 8 December 2016

Capital

Nick HawkinsChief Financial Officer

Optimising our capital mixCapital sustainability

35

Capital

platformDebt / hybrid

Equity

Reinsurance

Two key decisions

• Quantum of capital

• Form of capital (mix)

Capital mix trends

• Increased diversification

• Reduced emphasis on equity

• Greater use of reinsurance capital

Capital | 8 December 2016

4,000

4,500

5,000

5,500

6,000

6,500

7,000

7,500

FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17(YTD)

Ordinary Share Capital ($m)

EquityPast growth driven by M&A funding needs

36

Dec-13/Jan-14

Wesfarmers acquisition

Jun-15

Berkshire Hathaway

placement

Feb-09

Post-GFC placement

Oct-16

Share buyback

Growth driven by

funding of acquisitions

(e.g. Wesfarmers)

Reduced M&A appetite

going forward – large

market shares in Australia

and New Zealand

Where excess capital

available, preferred capital

management form =

off-market buy-back

• Franking credit utilisation –buy-back at significant discount

• Positive EPS/ROE effect


Dividend policyIncreased payout ratio

37

4.08.5 9.0

5.0

11.013.0 13.0 13.06.0

4.57.0

12.0

25.0 26.016.0

13.0

10.0

71.5% 70.8%67.1%

60.5%64.7%

69.9% 70.2%72.9%

FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16

Interim Dividend (¢) Final Dividend (¢) Special Dividend (¢) Payout Ratio (excl. Special)

Payout policy

increased to 60-80% of

cash earnings in FY16

Strong pro forma

30 June 2016 franking

position

• Able to frank ~$370m of further dividends

• After FY16 dividend and buy-back

• Before tax payments made after 30 June


Debt and hybrid capitalActively managed instrument mix

38

1401

1053

1450 1377

1659 1620 1752 1762

1962

42.6%

29.2%

36.0%33.7%

38.3%

34.5% 35.4%33.8%

36.8%

FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16

Interest-bearing liabilities ($m) Debt to total tangible capitalisation Target range (30-40%)

* Assumes 50% take-up of CPS reinvestment offer, as part of Capital Notes issue.

0

500

1000

1500

2000

0-1 1-2 2-3 3-5 5-10 10-20 >20

$mPro Forma Debt Maturity Profile

Years from 31 December 2016

Call/exchange date Legal maturity date


Reinsurance capitalDiversification away from traditional forms

39

• $7bn of gross

catastrophe cover

(80% placed)

• $200m MER post

quota share

• Aggregate cover

• Perils stop-loss

FY basis

• Run-off portfolio

ADCs (asbestos,

earthquake)

Quota shares:

• 20% whole-of-

account (Berkshire

Hathaway)

• 30% CTP

(Munich Re)

Operating

capital

Catastrophe

protection

Volatility

cover

Reinsurance capital

-

500

1,000

1,500

2,000

2,500

3,000

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16

Reinsurance Capital ($m)

Catastrophe* (LHS) Aggregate* (RHS) Quota share (RHS)

* Calendar year basis


Reinsurance capitalLowering earnings volatility and regulatory capital requirement

40

Rationale / appeal

• Intrinsic part of capital management approach

• Scale driven by peak exposures

• Many long-standing counterparty relationships

• Enhanced capital efficiency

• Reduced earnings volatility

• Lengthy and straightforward transactions with established counterparties

• No impact on management of operating platform

• Tactical covers

• Reduced earnings volatility

Future considerations

• Increased multi-year component

• Minimisation of refinancing risk –differing maturity profiles

• Counterparty concentration

• Increased aggregate protection,FY-based perils cover

• Take-up influenced by prevailing market conditions

Catastrophecover

Operatingcapital(quota shares)

Volatilitycover


Regulatory capitalStrong position, above or within benchmark range multiples

41

1.67

2.31

1.721.62

1.701.80

1.72

1.09

1.71

1.14 1.04 1.141.23

1.06

FY13 1H14 FY14 1H15 FY15 1H16 FY16

PCA CET1 PCA target range (1.4-1.6) CET1 target range (0.9-1.1)


Trading update, summary and Q&A

Peter HarmerManaging Director and Chief Executive Officer

FY17 trading updateGWP growth and reported insurance margin guidance reaffirmed

• Sound rate-driven growth in short tail personal lines, countering modest claims inflation

• Further encouraging signs of bottoming of commercial market, notably in Australia

• CTP performance stabilising, as rate increases offset higher frequency

• Delay in anticipated NSW CTP reform –no earlier than calendar 2018

• Likely combined net earthquake and storm costs of ~$200m from major events in November

• Small net negative in FY17 from operational partnering and systems simplification initiatives

FY17 guidance

GWP growth Relatively flat

Reportedinsurance margin

12.5 - 14.5%

Underlying assumptions

1Net losses fromnatural perils of $680m

3No materialmovement in foreign exchangerates or investmentmarkets

2Reservereleases of at least 1%

43Trading update & summary | 8 December 2016

44

Conclusion

CustomerImproved

understandingand segmentation

EfficiencyGross cost run rate reduction of at least 10% by end FY19

Capitalmanagement

Optimised mix –reduced reliance on

equity

DeliversStrong

shareholder returns

Our story3-5 years

Growth• Australia-New Zealand –

system growth, ~3-5%

• Asia – higher growth,dial-up potential

Trading update & summary | 8 December 2016

This presentation contains general information in summary form which is current as at 8 December 2016. It presents financial information on both a statutory basis (prepared in accordance with

Australian Accounting Standards which comply with International Financial Reporting Standards (IFRS)) and non-IFRS basis.

This presentation is not a recommendation or advice in relation to Insurance Australia Group Limited (IAG) or any product or service offered by IAG’s subsidiaries and does not take into

account the financial situation, investment objectives or particular needs of any person. It is not intended to be relied upon as advice to investors or potential investors, and does not contain all

information relevant or necessary for an investment decision. No recommendation is made as to how investors should make an investment decision. Investors must rely on their own

examination of IAG, including the merits and risks involved, and should consult with their own professional advisers in connection with any acquisition of securities. This presentation should be

read in conjunction with IAG’s other periodic and continuous disclosure announcements filed with the Australian Securities Exchange which are also available at www.iag.com.au.

No representation or warranty, express or implied, is made as to the currency, accuracy, adequacy, completeness or reliability of any statements, estimates or opinions, or the accuracy,

likelihood of achievement or reasonableness of any forecasts, prospects or returns contained in, or implied by, this presentation. To the maximum extent permitted by law, IAG, its subsidiaries

and their respective directors, officers, employees, agents and advisers disclaim all liability and responsibility for any direct or indirect loss, costs or damage which may be suffered by any

recipient through use of or reliance on anything contained in, implied by or omitted from this presentation.

To the extent that certain statements contained in this presentation may constitute “forward-looking statements” or statements about “future matters”, the information reflects IAG’s intent, belief

or expectations at the date of this presentation. Any forward-looking statements, including projections, guidance on future revenues, earnings and estimates, are provided as a general guide

only and should not be relied upon as an indication or guarantee of future performance. Forward-looking statements involve known and unknown risks, uncertainties, assumptions,

contingencies and other factors (many of which are beyond the control of IAG and its directors, officers, employees, agents and advisers) that may cause IAG’s actual results, performance or

achievements to differ materially from any future results, performance or achievements predicted, expressed or implied by these forward-looking statements. Subject to any legal or regulatory

obligations, IAG disclaims any obligation or undertaking to release any updates or revisions to the information in this presentation to reflect any change in expectations or assumptions.

Any forward-looking statements, opinions and estimates in this presentation are based on assumptions and contingencies which are subject to change without notice, as are statements about

market and industry trends, which are based on interpretations of current market conditions. Neither IAG, nor any other person, gives any representation, assurance or guarantee that the

occurrence of the events expressed or implied in any forward-looking statements in this presentation will actually occur and IAG assumes no obligation to update such information. In addition,

past performance is no guarantee or indication of future performance.

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Important information

45IAG Investor Day | 2016

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IAG Investor Day...IAG Investor Day 8 December 2016 Introduction & strategy overview Peter Harmer Managing Director and Chief Executive Officer 3 09.00 am Introduction & strategy overview